In the computer printer business, everyone knows the big money comes from the sale of ink cartridges.

Most of these cartridges are made by printer manufacturers and sell for a substantial premium. Some come from unauthorized sources, sell for substantially less and attract the attention of antipiracy lawyers.

Cryptography Research Inc. (CRI), a San Francisco company, is developing chip technology aimed at helping printer manufacturers protect this primary source of profit. The company's chips use cryptography designed to make it harder for printers to use off-brand and counterfeit cartridges.

"We're not saying we can end piracy, but our system is designed to recover from failure," said Kit Rodgers, CRI's vice president of business development.

Not all ink-cartridge remanufacturing is illegal--much of it is, in fact, legitimate--but pirated ink-cartridge technology cuts substantially into original manufacturers' profits.

There are three main ways the $60 billion-a-year worldwide printing industry loses money:

 Used cartridges get refilled and sold as "new"-- instead of as remanufactured.

 Cartridges get illegally replicated through reverse engineering.

 Printers get hacked or physically altered to use any type of ink.

Although solid figures on counterfeiting are impossible to determine, it's estimated to cost the industry at least $3 billion a year, according to the Image Supplies Coalition, a lobbying group formed to fight piracy and cloning in the ink and toner industry.

You can see 95 percent of the (chip's) grid and you still don't know how it works.

--Kit Rodgers,VP of business development,CRI

Cryptography is a method of encrypting data so that only a specific, private key can unlock, or decrypt, the information. It's used in everything from credit cards to digital media. CRI plans to create a secure chip that will allow only certain ink cartridges to communicate with certain printers.

Although this concept isn't new, CRI said its chip will be designed for use in standard fabrication processes, eliminating the need for a special--and more expensive--manufacturing process. CRI also said that the chip will be designed that so large portions of it will have no decipherable structure, a feature that would thwart someone attempting to reverse-engineer the chip by examining it under a microscope to determine how it works.

"You can see 95 percent of the (chip's) grid and you still don't know how it works," Rodgers said. There also are other, secret elements CRI won't reveal for security and competitive reasons.

Skillful hackers can eventually crack almost any code thrown at them and then exploit it for commercial purposes. Once antipiracy encryption is hacked on a product such as high-definition DVDs, for example, it's cracked forever and the discs can be copied and played using the hack. CRI takes a different tack with its protection scheme: its chip generates a separate, random code for each ink cartridge, thus requiring a would-be hacker to break every successive cartridge's code to make use of the cartridge.

Credit: CRI

This is a platform CRI uses for testing
the security and authenticity of chips.

"We want to make sure you can't repeat the same attack," said Benjamin Jun, CRI's vice president of technology. "If (hackers) have to rebreak it over and over, it's not as good a business model."

The chip, called CryptoFirewall, is not in use in this industry yet, but it's been widely deployed in the pay-TV sector, where 25 million set-top boxes have a similar technology from CRI embedded, the company said. CRI will also soon debut a similar copy-protection feature for Blu-ray video discs. The printer technology will be available in early 2008, according to CRI.

Counterfeiting and piracy are all but impossible to eradicate, but CRI hopes to at least minimize the financial damage they cause. Today, there are 123 million desktop inkjet printers and 25.6 million laserjet printers in use in the U.S., according to InfoTrends.

In terms of making and selling hardware, printers themselves are one of the least profitable sectors. Often the manufacturers are willing to with the goal of making money on sales of ink. Hewlett-Packard, the biggest PC maker in the world, actually makes the most profit from its printer business: 46 percent of its total earnings in the most recent fiscal quarter were generated by its Imaging and Printing Group. And ink is a key.

About the author

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur.
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